Trade crash may be less dramatic than predicted: QIMA

20 Oct '20

4 min read

Pic: Shutterstock

Despite the fairly apocalyptic outlook that prevailed earlier in the year, sourcing insights for the third quarter (Q3) suggest that the crash of global trade in 2020 may ultimately be less dramatic than predicted, according to field data from Hong Kong-headquartered QIMA that shows sourcing demand is picking up pace in manufacturing powerhouses throughout Asia, including China, Vietnam and Bangladesh.

All such countries are poised to wrap up the third quarter with positive year-on-year (YoY) growth figures—a first for 2020. However, this turnaround is not without a cost: ethical audit data collected in reopened factories suggests that the pandemic may have reversed a number of the sustainability and social compliance gains made over the past few years, QIMA said in a press release.

QIMA provides supply chain compliance solutions and partners with brands, retailers and importers to secure, manage and optimise their global supply network.

After following a pattern of W-shaped decline and recovery throughout the first half of 2020, China sourcing has continued on an upward swing in Q3. QIMA data shows a notable swell in inspection and audit demand in July and August.

Western businesses were quick to flock back to China in Q3, with demand for inspections and audits from US and European Union (EU) buyers spiking by 15 per cent YoY for both in Q3.

Meanwhile Chinese textile and apparel volumes continue to struggle, recording a 15 per cent decline in Q3 YoY and a 27 per cent tear-to-date decline, suffering from an ever-growing competition from its Asian neighbours.

Indeed, the rebound of sourcing has not been limited to China, with inspection and audit demand picking up again even more strongly in manufacturing hubs throughout Asia, showing further evidence of global supply chains' disentangling from China.

Meanwhile, demand for inspections and audits in South Asia rose across the board in Q3, as the tentative recovery that had begun in June continued and progressively accelerated for three consecutive months. This recovery is being led by South Asia's textile powerhouses such as Bangladesh, where demand for textile and apparel inspections surged by 86 per cent YoY in September, propelled, among other factors, by the continuing influx of US buyers as they continue diversifying their apparel supply chains away from China.

It is worth noting that buyers from both sides of the Atlantic played an equally important role in this rebound of manufacturing, not just in China, but throughout Asia. Vietnam received similarly evenhanded attention, with textile and homeware among the most popular product categories.

By contrast, the trend towards increased near-shoring observed earlier in 2020 was less prominent in Q3. For instance, US brands, especially in the textile and apparel sector, were more likely to take advantage of the reopening capacities in South Asia (textiles inspection demand +38 per cent YoY in Q3) than divert more of their sourcing to Latin and South America, where the COVID-19 impact was still in full force in Q3.

EU buyers, however, continued expanding their near-shoring sourcing footprint in the Mediterranean and the Middle East, with Morocco, Egypt and Tunisia all recording double-digit YoY growth in inspection and audit demand during Q3, QIMA said.

QIMA audit data indicates that businesses continuing to operate in ‘survival mode’ is putting further strain on ethical compliance in global supply chains, with businesses more likely to prioritise cost saving over sustainable sourcing, as well as push their suppliers to meet deadlines for high-demand products like personal protective equipment.

Such practices can lead to insufficient scrutiny of working conditions and labour policies, resulting in increased risks to worker safety, forced overtime and other ethical violations.

Fibre2Fashion News Desk (DS)